Postie Plus widens 1H drop as sales, margins dwindle

Postie Plus Group, which last year avoided breaching its banking covenants, is in talks with its banks again after posting a wider first-half on dwindling sales and thinner margins and bracing for an annual loss. The shares tumbled.

The Auckland-based company made a pre-tax loss from continuing operations of $2.56 million in six months ended February 3, compared to a loss of $924,000 a year earlier, it says in a statement. Sales fell 1.5 percent to $43.93 million and overall gross margins declined. The results will be announced on March 29.

Postie Plus expects a "substantial loss for FY2013" after its logistics and distribution service provider struggled to develop a new distribution centre, and will breach its banking covenants due to the loss of margin.

"The company has commenced discussions with its bank," it says. "PPGL is working intensively with the service provider to accelerate distribution performance and has also engaged independent expertise to assist in this process."

Postie Plus shares fell 13 percent to 21 cents on the NZX.

According to the company's latest annual report, it had secured bank loans of about $9.76 million as at August 5 at an average interest rate of 5.15 percent. Notes to the accounts show the company did not meet its interest to ebit ratio covenant of 1.5 times for the rolling 12 months to April 2012 though it was in compliance with proprietorship and liquidity covenants.

Last year Postie Plus outsourced its distribution systems and processes to a purpose-built centre in Mangere as part of its shift to Auckland, where it saw greater opportunities.